IDEAS home Printed from https://ideas.repec.org/a/taf/irapec/v14y2000i2p235-251.html
   My bibliography  Save this article

The Foreign Exchange Constraints to Economic Adjustment: The case of Iran

Author

Listed:
  • A. Sepehri
  • S. Moshiri
  • M. Doudongee

Abstract

While a great deal of work has been devoted to the assessment of the effects of structural adjustment programmes, little is known about the relative importance of external financing and its contribution to the success of these adjustment programmes. This paper examines this question, using Iran's recent experience with an orthodox structural adjustment with its limited access to medium- and long-term external financing. Using the annual data for 1963-94, a three-gap model of growth is formulated and estimated in which economic growth is constrained by domestic saving, foreign exchange and public sector resource availability. The resulting foreign exchange-gap equation demonstrates a sharp trade-off between investment (capacity generation) and the capacity utilization rate. The model is simulated over the period 1995-99 under three growth path scenarios. The size of the foreign exchange gap under these growth path scenarios illustrates quite vividly the centrality of the foreign exchange constraint to the achievement of a modest growth rate in the medium-term.

Suggested Citation

  • A. Sepehri & S. Moshiri & M. Doudongee, 2000. "The Foreign Exchange Constraints to Economic Adjustment: The case of Iran," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(2), pages 235-251.
    • Handle: RePEc:taf:irapec:v:14:y:2000:i:2:p:235-251
    DOI: 10.1080/02692170050024769
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/02692170050024769
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/02692170050024769?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Pesaran, M.H. & Karshenas, M., 1993. "Exchange Rate Unification, the Role of Markets and Planning in the Iranian Economic Reconstruction," Cambridge Working Papers in Economics 9313, Faculty of Economics, University of Cambridge.
    2. Graham Bird, 2004. "External Financing and Balance of Payments Adjustment in Developing Countries: Getting a Better Policy Mix," Palgrave Macmillan Books, in: International Finance and the Developing Economies, chapter 2, pages 14-33, Palgrave Macmillan.
    3. Farzin, Y. H., 1995. "Foreign exchange reform in Iran: Badly designed, badly managed," World Development, Elsevier, vol. 23(6), pages 987-1001, June.
    4. Bacha, Edmar L., 1987. "IMF conditionality: Conceptual problems and policy alternatives," World Development, Elsevier, vol. 15(12), pages 1457-1467, December.
    5. Bleaney, Michael F., 1996. "Macroeconomic stability, investment and growth in developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 461-477, March.
    6. Bleaney, Michael & Greenaway, David, 1993. "Adjustment to external imbalance and investment slumps in developing countries," European Economic Review, Elsevier, vol. 37(2-3), pages 577-585, April.
    7. Bhattacharya, Rina, 1997. "Pace, sequencing and credibility of structural reforms," World Development, Elsevier, vol. 25(7), pages 1045-1061, July.
    8. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
    9. Fielding, David, 1997. "Adjustment, trade policy and investment slumps: evidence from Africa," Journal of Development Economics, Elsevier, vol. 52(1), pages 121-137, February.
    10. International Monetary Fund, 1995. "Islamic Republic of Iran: Recent Economic Developments," IMF Staff Country Reports 1995/121, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Barbara Schuster & Siavash Radpour, 2022. "No "Great Resignation" for Older Workers- Mass Job Loss Drove the Retirement Surge," SCEPA publication series. 2022-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    2. Aleksandr V. Gevorkyan & Tarron Khemraj, 2022. "Dominant Currency Shocks and Foreign Exchange Pressure in the Periphery," SCEPA working paper series. 2022-01, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    3. Thilak Ranaweera, 2004. "Ghost of the financing gap: an overlooked aspect of the aid debate," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(4), pages 637-652.
    4. Khemraj, Tarron & Langrin, R. Brian, 2009. "Dynamic interactions of bank assets in two foreign currency constrained economies," MPRA Paper 36620, University Library of Munich, Germany, revised Nov 2010.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sushanta Mallick & Tomoe Moore, 2008. "Foreign Capital in a Growth Model," Review of Development Economics, Wiley Blackwell, vol. 12(1), pages 143-159, February.
    2. Bleaney, Michael & Greenaway, David, 2001. "The impact of terms of trade and real exchange rate volatility on investment and growth in sub-Saharan Africa," Journal of Development Economics, Elsevier, vol. 65(2), pages 491-500, August.
    3. Asiedu, Edward & Sadekla, Sylvester S. & Bokpin, Godfred A., 2020. "Aid to Africa’s agriculture towards building physical capital: Empirical evidence and implications for post-COVID-19 food insecurity," World Development Perspectives, Elsevier, vol. 20(C).
    4. Edmar Bacha, 2017. "On the economics of development: A view from Latin America," Textos para Discussão 41, Instituto de Estudos de Política Econômica.
    5. Kul B. Luintel & George Mavrotas, 2005. "Examining Private Investment Heterogeneity: Evidence from a Dynamic Panel," WIDER Working Paper Series DP2005-11, World Institute for Development Economic Research (UNU-WIDER).
    6. Tarp, Finn, 1994. "De makroøkonomiske reformer i teoretisk belysning [Macroeconomic Reforms in Theoretical Context]," MPRA Paper 64206, University Library of Munich, Germany.
    7. Xinshen DIAO & Terry L. ROE & A. Erinç YELDAN, 1999. "How Fiscal Mismanagement May Impede Trade Reform: Lessons From An Intertemporal, Multi-Sector General Equilibrium Model For Turkey," The Developing Economies, Institute of Developing Economies, vol. 37(1), pages 59-88, March.
    8. Ilya V. Prilepskiy, 2018. "Impact of Fiscal Rules on Exchange Rate Volatility," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 9-20, December.
    9. Pierre‐Richard Agénor, 2004. "Macroeconomic Adjustment and the Poor: Analytical Issues and Cross‐Country Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 18(3), pages 351-408, July.
    10. Castro, Lilian & Gerchunoff, Pablo, 1992. "La racionalidad macroeconómica de las privatizaciones: el caso argentino," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 33806, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    11. Juliana Yael Milovich, 2018. "Does Aid Reduce Poverty?," OPHI Working Papers ophiwp122.pdf, Queen Elizabeth House, University of Oxford.
    12. Cécile Couharde & Vincent Géronimi & Armand Taranco, 2012. "Les hausses récentes des cours des matières premières traduisent-elles l'entrée dans un régime de prix plus élevés ?," Revue Tiers-Monde, Armand Colin, vol. 0(3), pages 13-34.
    13. Bill Gibson, 2008. "Keynesian And Neoclassical Closures In An Agent-Based Context," UMASS Amherst Economics Working Papers 2008-03, University of Massachusetts Amherst, Department of Economics.
    14. Piotr Misztal, 2011. "The Relationship Between Savings And Economic Growth In Countries With Different Level Of Economic Development," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 7(2), pages 17-29, August.
    15. Sushil Kumar Haldar, 2009. "Economic Growth in India Revisited," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 10(1), pages 105-126, January.
    16. Ramesh Mohan, 2006. "Causal Relationship Between Savings And Economic Growth In Countries With Different Income Levels," Economics Bulletin, AccessEcon, vol. 5(3), pages 1-12.
    17. Campos, Nauro F. & Horváth, Roman, 2006. "Reform Redux: Measurement, Determinants and Reversals," IZA Discussion Papers 2093, Institute of Labor Economics (IZA).
    18. Thanoon, Marwan Abdul-Malik & Baharumshah, Ahmad Zubaidi, 2003. "The road to recovery in Malaysia: a three-gap analysis," Journal of Policy Modeling, Elsevier, vol. 25(8), pages 857-861, November.
    19. Menbere Workie Tiruneh, 2004. "An Empirical Investigation Into the Determinants of External Indebtedness," Prague Economic Papers, Prague University of Economics and Business, vol. 2004(3), pages 261-277.
    20. Bindeswar Prasad Lekhak, 2023. "Foreign Aid Effectiveness in the Education Sector: A Dynamic Panel Analysis," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 15(9), pages 1-10, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:irapec:v:14:y:2000:i:2:p:235-251. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIRA20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.